Carrying on a business in an SMSF

Self-managed super funds can carry on a business providing the business is allowed under the trust deed and operated for the sole purpose of providing retirement benefits for fund members.

Carrying on a business through an SMSF does have restrictions that other businesses do not have, such as entering into credit arrangements or having overdrafts.

SMSF trustees that carry on a business through their fund must adhere to the sole purpose test. The ATO looks for cases where:

the trustee employs a family member

the ‘business’ is an activity commonly carried out as a hobby or pastime

the business carried on by the fund has links to associated trading entities

there are indications the fund’s business assets are available for the private use and benefit of the trustee or related parties

The same regulatory provisions still apply to funds that carry on a business, i.e, SMSF investments must be made on a commercial ‘arm’s length’ basis, business activities must be conducted in accordance with the SMSF’s investment strategy, collectables and personal use assets cannot be displayed at the business premises and so on.

The SMSF cannot be involved in the following business activities:

selling an SMSF asset for less than its market value to a member or relative of a member

purchasing an asset for greater than its market value from a member or relative of a member

acquiring services in excess of what the SMSF requires from a member or relative of a member

paying an inflated price for services acquired from a member or relative of a member.

This entry was posted
on Wednesday, August 30th, 2017 at 8:47 am and is filed under General News.
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